Affordable Homeownership Keeps Denver Vibrant
By Councilwoman Robin Kniech
Vibrant communities thrive on diversity, including diversity of cultural background, ethnic heritage, income, and age.
Not only are there better social outcomes for families and children, but economic outcomes tend to be better too. When there is a mix of incomes, stable and diverse communities can improve a child’s educational achievement, and provide sustainable business and job growth. This kind of vibrant diversity is what makes the greater Park Hill neighborhood so great, and it’s a key reason why ensuring homeownership for families of a range of incomes is so important.
As Denver’s economy has soared, so too have home prices, but incomes have remained stagnant. Fewer moderate-income working families are able to afford the rising home prices in Park Hill or elsewhere across the city. The homes that may be affordable to these families tend to be older and much more expensive to maintain, even if the initial sale prices are lower than new housing.
As just one piece of Denver’s affordable housing strategy, I have been working over the last year and a half with a broad coalition of stakeholders to revise the city’s Inclusionary Housing Ordinance (IHO) to expand the number of affordable homes available.
By balancing affordability with wealth creation, the ordinance helps to foster vibrant communities through mixed-income homeownership opportunities. Originally passed in 2002, the ordinance requires for-sale housing developments of more than 30 units to make 10 percent of their homes affordable to families earning between $42,950 and $61,350 annually (for family sizes of 1 to 4).
The current ordinance has built or financed more than 370 homes, either on-site by developers as part of their market rate projects, or financed when developers have opted to pay “cash in lieu” of building affordable homes. This has happened most often in higher-cost, higher-need areas, like downtown and central Denver.
So, we’re missing an opportunity in some of these higher cost neighborhoods, and if we want more homes built on-site, as part of mixed-income buildings in these higher cost areas, we need to make building homes more attractive than buying out.
Here are the key features of the revised ordinance:
1) An enhanced culture of flexibility, providing developers more options to create different size, type or affordability of homes on-site, or even off-site through partnerships with other developers. Most cities have a larger array of incentives available to help developers absorb the economics of providing affordable homes than Denver does, so flexibility is intended to increase the chances for real homes to be built rather than paying cash. To foster creative partnerships and “outside the box” solutions to Denver’s housing needs, an independent advisor would provide technical assistance and support for developers to explore these options.
2) Variable incentives/cash in lieu levels to mirror the variation in housing prices across Denver’s neighborhoods. The requirement to build 10 percent of homes as affordable in medium to large for-sale development projects will remain the same in the new ordinance. But the incentive payments or cash in lieu amounts will change based on the “zone” where the project is located.
• Sixty percent of Denver neighborhoods are identified as “medium” zones and will see virtually no change to the economic factors. It will cost developers the exact same to pay cash in lieu, and they will receive about the same if they build the affordable homes. North and South Park Hill are both “medium” neighborhoods, along with the area immediately surrounding the transit stop in Northeast Park Hill. These areas will see little change under a revised ordinance.
• Using median home prices and proximity to transit to identify higher-cost, higher-need neighborhoods where the cost of building affordable homes might be higher and therefore less likely, approximately 15 percent of the city has been identified as a “high” zone. In these “high” areas, the revised ordinance will more strongly encourage building of homes by raising the amount of cash a developer has to pay if they opt not to build affordable homes, while at the same time providing a much higher incentive of $20,000 per unit to improve the economics of building homes.
• Areas where home prices are lowest and there is little transit access – about 25 percent of the city – will be in a “low” zone where the ordinance lowers both the amount of cash in lieu fees and incentives, simply allowing market forces to play a greater role in determining which choice a developer makes. The portions of Northeast Park Hill that are further from the transit stop fall into this zone, in part because there are more affordable, market rate homes available at lower prices in this area that might make new homes with affordability restrictions at a similarly price harder to sell. But developers who do build new, affordable homes under the revised ordinance will receive a $2,500 per home incentive.
Please contact my office at kniechatlarge@denvergov.org or (720) 337-7712 for more information, and visit my website at www.denvergov.org/robinkniech to learn more about the proposed revisions and upcoming process.
Robin Kniech is a Denver City Councilwoman at large.